UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010

or

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ______________________ to _______________________

Commission File Number: 000-51764

LINCOLNWAY ENERGY, LLC

(Exact name of registrant as specified in its charter)

Iowa	20-1118105
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
59511 W. Lincoln Highway, Nevada, Iowa	50201
(Address of principal executive offices)	(Zip Code)

515-232-1010

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes    ¨   No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

¨   Yes     ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨	Accelerated filer  ¨
Non-accelerated filer  þ	Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes þ No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 42,049 membership units outstanding at August 1, 2010.

LINCOLNWAY ENERGY, LLC

FORM 10-Q

For the Quarter Ended June 30, 2010

INDEX

			Page
Part I.	Financial Information
	Item 1.	Unaudited Financial Statements
		a)   Balance Sheets	2
		b)   Statements of Operations	4
		c)   Statements of Cash Flows	6
		d)   Notes to Unaudited Financial Statements	7
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
	Item 4.	Controls and Procedures	30
Part II.	Other Information
	Item 1.	Legal Proceedings	31
	Item 1A.	Risk Factors	31
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
	Item 3.	Defaults Upon Senior Securities	32
	Item 5.	Other Information	33
	Item 6.	Exhibits	33
Signatures			36
Exhibits Filed With This Report
	Rule 13a-14(a) Certification of President and Chief Executive Officer		E-1
	Rule 13a-14(a) Certification of Chief Financial Officer		E-3
	Section 1350 Certification of President and Chief Executive Officer		E-5
	Section 1350 Certification of Chief Financial Officer		E-6

PART I - FINANCIAL INFORMATION

Item 1.  Unaudited Financial Statements.

Lincolnway Energy, LLC

Balance Sheets

	June 30, 2010			September 30, 2009
	(Unaudited)
ASSETS (Note 4)
CURRENT ASSETS
Cash and cash equivalents	$	5,202,158		$	5,824,947
Due from broker		1,410,658			565,276
Trade and other accounts receivable (Note 7)		3,546,987			3,772,183
Inventories (Note 4)		3,814,405			2,485,372
Prepaid expenses and other		307,753			197,047
Total current assets		14,281,961			12,844,825
PROPERTY AND EQUIPMENT
Land and land improvements		7,580,868			7,580,868
Buildings and improvements		1,604,305			1,604,305
Plant and process equipment		75,081,449			74,853,995
Office furniture and equipment		375,255			355,654
Construction in progress		229,377			-
		84,871,254			84,394,822
Accumulated depreciation		(33,320,304	)		(27,101,259	)
		51,550,950			57,293,563
OTHER ASSETS
Certificate of deposit, at cost, restricted (Note 5)		351,000			351,000
Financing costs, net of amortization of $198,439 and $166,260		273,523			305,702
Other		170,093			297,011
		794,616			953,713
	$	66,627,527		$	71,092,101

See Notes to Unaudited  Financial Statements.

2

	June 30, 2010		September 30, 2009
	(Unaudited)
LIABILITIES AND MEMBERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	948,557	$	877,216
Accounts payable, related party (Note 6)		402,839		298,533
Current maturities of long-term debt (Note 5)		1,301,808		3,825,357
Accrued expenses		921,427		948,309
Derivative financial instruments (Note 8)		311,640		224,850
Total current liabilities		3,886,271		6,174,265
NONCURRENT LIABILITIES
Long-term debt, less current maturities (Note 5)		10,691,775		14,488,584
Other		450,000		450,000
Total noncurrent liabilities		11,141,775		14,938,584
COMMITMENTS AND CONTINGENCY (Notes  7 and 10)
MEMBERS’ EQUITY
Member contributions, net of issuance costs, 42,049 units issued and outstanding		38,990,105		38,990,105
Retained earnings		12,609,376		10,989,147
		51,599,481		49,979,252
	$	66,627,527	$	71,092,101

3

Lincolnway Energy, LLC

Statements of Operations

	Three Months			Three Months
	Ended			Ended
	June 30, 2010			June 30, 2009
	(Unaudited)
Revenues (Notes 2 and 7)	$	25,067,784		$	23,245,823
Cost of goods sold		25,629,974			24,603,678
Gross (loss)		(562,190	)		(1,357,855	)
General and administrative expenses		599,335			551,814
Operating (loss)		(1,161,525	)		(1,909,669	)
Other income (expense):
Interest income		5,894			8,202
Interest expense		(189,363	)		(263,656	)
		(183,469	)		(255,454	)
Net (loss)	$	(1,344,994	)	$	(2,165,123	)
Weighted average units outstanding		42,049			42,049
Net (loss)  per unit - basic and diluted	$	(31.99	)	$	(51.49	)

See Notes to Unaudited  Financial Statements.

4

Lincolnway Energy, LLC

Statements of Operations

	Nine Months			Nine Months
	Ended			Ended
	June 30, 2010			June 30, 2009
	(Unaudited)
Revenues (Notes 2 and 7)	$	85,666,633		$	80,819,529
Cost of goods sold		79,536,825			86,111,754
Gross profit (loss)		6,129,808			(5,292,225	)
General and administrative expenses		1,908,384			1,776,716
Operating income (loss)		4,221,424			(7,068,941	)
Other income (expense):
Interest income		19,854			31,002
Interest expense		(620,168	)		(827,299	)
Other income		101,569			328,777
		(498,745	)		(467,520	)
Net income (loss)	$	3,722,679		$	(7,536,461	)
Weighted average units outstanding		42,049			42,049
Net income (loss) per unit - basic and diluted	$	88.53		$	(179.23	)

See Notes to Unaudited  Financial Statements.

5

Lincolnway Energy, LLC

Statements of Cash Flows

	Nine Months			Nine Months
	Ended			Ended
	June 30, 2010			June 30, 2009
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	3,722,679		$	(7,536,461	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		6,256,363			6,260,678
Loss on disposal of property and equipment		434			3,599
Forgiven loan		-			(100,000	)
Changes in working capital components:
Due from broker		(845,382	)		5,939,337
Trade and other accounts receivable		225,196			(957,983	)
Inventories		(1,329,033	)		333,516
Prepaid expenses and other		(110,706	)		(105,108	)
Other assets		126,918			168,983
Accounts payable		(64,585	)		(1,383,421	)
Accounts payable, related party		104,306			(456,941	)
Accrued expenses		(26,882	)		356,564
Accrued loss on purchase commitments		-			(1,021,044	)
Derivative financial instruments		86,790			(5,353,030	)
Net cash provided by (used in) operating activities		8,146,098			(3,851,311	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(346,079	)		(602,458	)
Net cash (used in) investing activities		(346,079	)		(602,458	)
CASH FLOWS FROM FINANCING ACTIVITIES
Member distributions		(2,102,450	)		-
Payments on long-term borrowings		(6,320,358	)		(1,319,364	)
Net cash (used in) financing activities		(8,422,808	)		(1,319,364	)
Net (decrease) in cash and cash equivalents		(622,789	)		(5,773,133	)
CASH AND CASH EQUIVALENTS
Beginning		5,824,947			8,711,048
Ending	$	5,202,158		$	2,937,915
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION, cash paid for interest	$	630,867		$	817,780
SUPPLEMENTAL DISCLOSURES OF NONCASH OPERATING, INVESTING AND FINANCING ACTIVITIES
Construction in progress included in accounts payable	$	135,926		$	-

See Notes to Unaudited  Financial Statements.

6

Lincolnway Energy, LLC

Notes to Unaudited Financial Statements

Note 1. Nature of Business and Significant Accounting Policies

Principal business activity:  Lincolnway Energy, LLC (the Company), located in Nevada, Iowa, was formed in May 2004 to pool investors to build a 50 million gallon annual production dry mill corn-based ethanol plant.  The Company began making sales on May 30, 2006 and became operational during the quarter ended June 30, 2006.

Basis of presentation and other information:

The balance sheet as of September 30, 2009 was derived from the Company’s audited balance sheet as of that date.  The accompanying financial statements as of and for the three and nine months ended June 30, 2010 and 2009 are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods.  These unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto, for the year ended September 30, 2009 contained in the Company’s Annual Report  on Form 10-K.  The results of operations for the interim periods presented are not necessarily indicative of the results for the entire year.

Use of estimates:  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Income taxes:  The Company is organized as a partnership for federal and state income tax purposes and generally does not incur income taxes.  Instead, the Company’s earnings and losses are included in the income tax returns of the members.  Therefore, no provision or liability for federal or state income taxes has been included in these financial statements.

Earnings per unit:  Basic and diluted earnings per unit have been computed on the basis of the weighted average number of units outstanding during each period presented.

 Fair Value of financial instruments:  The carrying amounts of cash and cash equivalents, derivative financial instruments, trade accounts receivable, accounts payable and accrued expenses approximate fair value.  The carrying amount of long-term debt approximates fair value because the interest rates fluctuate with market rates or the fixed rates are based on current rates offered to the Company for debt with similar terms and maturities.

7

Lincolnway Energy, LLC

Notes to Unaudited Financial Statements

Note 2. Revenue by product is as follows:

(Excludes hedging activity)	Three Months		Three Months		Nine Months		Nine Months
	Ended		Ended		Ended		Ended
(In thousands)	June 30, 2010		June 30, 2009		June 30, 2010		June 30, 2009
Ethanol	$	19,808	$	18,645	$	69,319	$	64,164
Distiller's Grains		4,833		4,310		14,507		15,734
Other		435		291		1,144		911

Note 3. Members’ Equity

The Company was formed on May 19, 2004.  It was initially capitalized by the issuance of 1,924 membership units totaling $962,000 to the founding members of the Company.  The Company has one class of membership units.  A majority of the Board of Directors owns a membership interest in the Company.  The Company is authorized to issue up to 45,608 membership units without member approval.

Income and losses are allocated to all members based on their pro rata ownership interest. All unit transfers are effective the last day of the month.    Units may be issued or transferred only to persons eligible to be members of the Company and only in compliance with the provisions of the operating agreement.

Note 4. Inventories

Inventories consist of the following as of:

	June 30,		September 30,
	2010		2009
Raw materials, including corn, coal, chemicals and supplies	$	2,559,741	$	1,503,410
Work in process		798,067		567,782
Ethanol and distillers grains		456,597		414,180
Total	$	3,814,405	$	2,485,372

8

Lincolnway Energy, LLC

Notes to Unaudited Financial Statements

Note 5. Long-Term Debt

Long-term debt consists of the following as of:

	June 30, 2010			September 30, 2009
Construction term loan. (A)	$	9,000,000		$	15,250,000
Construction/revolving term loan. (C)		-			-
Note payable to contractor, interest-only quarterly payments at 5% due through maturity date of November 2014, secured by real estate and subordinate to financial institution debt commitments. (B )		1,216,781			1,216,781
Note payable to contractor, unsecured, interest-only quarterly payments at 4% due through maturity date of May 2021		1,250,000			1,250,000
Note payable to Iowa Department of Economic Development. (D)		190,000			212,500
Note payable to Iowa Department of Transportation. (E)		336,802			384,660
		11,993,583			18,313,941
Less current maturities		(1,301,808	)		(3,825,357	)
	$	10,691,775		$	14,488,584

(A) The Company has a construction and term loan with a financial institution.  Borrowings under the term loan include a variable interest rate based on the one-month LIBOR index rate plus 3.30%.  The rate will be reset automatically without notice to the Company, on the first “US Banking Day” of each succeeding week, and each change shall be applicable to all outstanding balances as of that date.  The agreement requires 30 principal payments of $1,250,000 per quarter commencing in December 2006 through March 2013. In order to alleviate some of the interest rate risk, the Company on July 25, 2008, fixed a portion of the loan or $7,750,000 at an interest rate of 6.62%, through July 2011. Upon maturity the fixed portion of the loan will revert back to a variable rate.  The same payment amortization schedule will apply.  The agreement requires the maintenance of certain financial and nonfinancial covenants.   Borrowings under this agreement are collateralized by substantially all of the Company’s assets.  As of June 30, 2010, the Company has made principal payments of $30,000,000, since the inception of the loan.

(B) The Company has a $1,100,000 subordinated note payable dated November 17, 2004 to an unrelated third party.  Quarterly interest payments began on March 31, 2007.  The third party allowed the Company to include the accrued interest of $116,781 through December 2006 into the principal of the note. Principal is due in full at maturity on November 17, 2014.

(C)  The Company has a $10,000,000 construction/revolving term credit facility with a financial institution which expires on September 1, 2016.  Borrowings under the credit facility agreement include a variable interest rate based on the one-month LIBOR index rate plus 3.30%.  The rate will be reset automatically without notice to the Company, on the first “US Banking Day” of each succeeding week, and each change shall be applicable to all outstanding balances as of that date.  Borrowings are subject to borrowing base restrictions as defined in the agreement.  The credit facility and revolving credit agreement require the maintenance of certain financial and nonfinancial covenants.  The variable interest rate will be based on the Borrowings under this agreement are collateralized by substantially all of the Company’s assets.  There was no balance outstanding as of June 30, 2010.

9

Lincolnway Energy, LLC

Notes to Unaudited Financial Statements

On July 3, 2007 the $351,000 revolving credit agreement was cancelled.  This agreement was for the benefit of a letter of credit that was required by an unrelated third party to lease rail cars.  An amendment was made to the lease agreement on June 19, 2007, that allowed the Company to purchase a certificate of deposit for $351,000 in lieu of the letter of credit that is pledged as collateral on the railcar lease. The Company has classified this certificate of deposit as restricted cash in other assets.

(D) The Company also has a $300,000 loan agreement with the Iowa Department of Economic Development (IDED).  The $300,000 loan is noninterest-bearing and due in monthly payments of $2,500 beginning December 2006 and a final payment of $152,500 due November 2012.  Borrowings under this agreement are collateralized by substantially all of the Company’s assets and subordinate to the above financial institution debt and construction and revolving loan/credit agreements included in (A) and (C).

(E) The Company entered into a $500,000 loan agreement with the Iowa Department of Transportation (IDOT) in February 2005.  The proceeds were disbursed upon submission of paid invoices.  Interest at 2.11% began accruing on January 1, 2007.  Principal payments will be due semiannually through July 2016.  The loan is secured by all rail track material constructed as part of the plan construction.  The debt is subordinate to the above $39,000,000 financial institution debt and construction and revolving loan/credit agreements included in (A) and (C).

Note 6. Related-Party Transactions

The Company has an agreement with the Heart of Iowa Coop (HOIC), a member of the Company, to provide 100% of the requirement of corn for use in the operation of the ethanol plant.  The Company purchased corn totaling $16,106,675 and $52,642,565 for the three months and nine months ended June 30, 2010, respectively.  There were corn purchases of $15,650,137 and $53,894,692 for the three months and nine months ended June 30, 2009, respectively. As of June 30, 2010, the Company has several corn cash contracts with HOIC amounting to approximately 1,364,618 bushels, for a commitment of $4,390,398 and several basis contracts representing 1,500,000 bushels of corn.  The contracts mature on various dates through September 2010.  The Company also has made some miscellaneous purchases from HOIC (storage fees, fuel, and propane costs) amounting to $25,809 and $73,195 for the three months and nine months ended June 30, 2010, respectively.  There were miscellaneous purchases of $45,590 and $82,333 for the three months and six months ended June 30, 2009, respectively. As of June 30, 2010 the amount due to HOIC is $402,839.

The Company is also purchasing anhydrous ammonia and propane from Prairie Land Cooperative, a member of the Company.  Total purchases for the three months and nine months ended June 30, 2010 is $6,013 and $20,451, respectively. Purchases for the three months and nine months ended June 30, 2009 is $172,351 and $688,753, respectively.   As of June 30, 2010 there is no amount due to Prairie Land Cooperative.

10

Lincolnway Energy, LLC

Notes to Unaudited Financial Statements

Note 7. Commitments and Major Customer

The Company had an agreement with an unrelated entity and major customer for marketing, selling, and distributing all of the ethanol produced by the Company.  Under this pooling arrangement, the Company paid the entity $.01 (one cent) per gallon for each gallon of ethanol sold.  For the three and nine months ended June 30, 2010 the Company has expensed none.  Marketing expense for the three months and nine months ended June 30, 2009 is $111,414 and $385,310, respectively. Revenues with this customer were none for the three and nine months ended June 30, 2010.  Revenues from this customer were $18,644,860 and $64,164,199 for the three months and nine months ended June 30, 2009, respectively.  There was no trade accounts receivable due from the customer as of June 30, 2010.

On September 25, 2009, the Company entered into a new agreement with an unrelated entity.  The agreement became effective on October 1, 2009.  The unrelated entity will be responsible for marketing and purchasing all of the ethanol produced by the company.  For the three and nine months ended June 30, 2010 the Company has expensed $172,803 and $513,278, respectively, under this agreement for marketing fees.  Revenues with this customer were $19,807,584 and $69,318,982 for the three and nine months ended June 30, 2010, respectively.  Trade accounts receivable of $2,603,428 was due from the customer as of June 30, 2010.

The Company has entered into an agreement with an unrelated entity for marketing, selling and distributing the distiller’s grains.  For the three months and nine months ended June 30, 2010, the Company has expensed marketing fees of $70,402 and $218,159, respectively, under this agreement.  The Company has expensed $68,349 and $260,577 for the three months and nine months ended June 30, 2009, respectively.  Revenues with this customer were $4,832,580 and $14,506,222 for the three months and nine months ended June 30, 2010, respectively.  There were $4,310,208 and $15,734,592 in revenues with this customer reported for the three months and nine months ended June 30, 2009.  Trade accounts receivable of $658,574 was due from the customer as of June 30, 2010.

The Company has an agreement with an unrelated party to provide the coal supply for the ethanol plant.     For the three months and nine months ended June 30, 2010 the Company has purchased $1,371,536 and $4,366,471, respectively, of coal under this contract.  For the three months and nine months ended June 30, 2009 is $1,102,428 and $4,124,472, respectively.

The Company has entered into a variable contract with a supplier of denaturant.  The variable contract is for a minimum purchase of 251,100 gallons at the Conway Opis In Line Prompt daily average plus $.1150/usg.  The term of the contract is from July 1, 2010 through September 30, 2010. The total future purchase commitment is $403,894.  For the three months and nine months ended June 30, 2010, the Company purchased $430,955 and $1,362,258 respectively, of denaturant.  For the three months and nine months ended June 30, 2009 is $168,086 and $753,781, respectively.

The Company has entered into two fixed contracts with a supplier of anhydrous ammonia.  The first contract is for a minimum purchase of 320,000 pounds at the rate of $.2125 per pound.  The term of this contract is from May 25, 2010 through June 30, 2010. The total future purchase commitment on this contract is $18,175.  The second contract is for a minimum purchase of 600,000 pounds at the rate of $.20 per pound.  The term of this contract is from July 1, 2010 through October 15, 2010. The total future purchase commitment on this contract is $120,000.  For the three months and nine months ended June 30, 2010, the Company purchased $160,148 and $446,724 respectively, of anhydrous ammonia.  Anhydrous ammonia purchases for the three months and nine months ended June 30, 2009 was $158,780 and $675,182, respectively.

11

Lincolnway Energy, LLC

Notes to Unaudited Financial Statements

Note 8. Risk Management

The Company’s activities expose it to a variety of market risks, including the effects of changes in commodity prices.  These financial exposures are monitored and managed by the Company as an integral part of its overall risk management program.  The Company’s risk management program focuses on the unpredictability of commodity markets and seeks to reduce the potentially adverse effects that the volatility of these markets may have on its operating results.

The Company maintains a risk management strategy that uses derivative instruments to minimize significant, unanticipated earnings fluctuations caused by market fluctuations.  The Company’s specific goal is to protect the Company from large moves in the commodity costs.

To reduce price risk caused by market fluctuations, the Company generally follows a policy of using exchange-traded futures and options contracts to minimize its net position of merchandisable agricultural commodity inventories and forward purchases and sales contracts.  Exchange traded futures and options contracts are designated as non-hedge derivatives and are valued at market price with changes in market price recorded in operating income through cost of goods sold for corn derivatives and through revenue for ethanol derivatives.

The effects on operating income from derivative activities is as follows:

	Three Months			Three Months			Nine Months			Nine Months
	Ended			Ended			Ended			Ended
	June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Increase (decrease) in revenue due to derivatives related to ethanol sales:
Realized	$	501,480		$	-		$	516,600		$	10,440
Unrealized		(508,897	)		-			77,073			-
Total effect on revenue		(7,417	)		-			593,673			10,440
(Increase) decrease in cost of goods sold due to derivatives related to corn costs:
Realized		(18,613	)		(1,520,000	)		(48,388	)		(2,826,438	)
Unrealized		59,988			1,390,263			25,638			(727,475	)
Total effect on cost of goods sold		41,375			(129,737	)		(22,750	)		(3,553,913	)
Total increase (decrease) to operating income due to derivative activities	$	33,958		$	(129,737	)	$	570,923		$	(3,543,473	)

Unrealized gains and losses on forward contracts, in which delivery has not occurred, are deemed “normal purchases and normal sales” , and therefore are not marked to market in the Company’s financial statements but are subject to a lower of cost or market assessment.

12

Lincolnway Energy, LLC

Notes to Unaudited Financial Statements

Note 9. Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  In determining fair value, the Company uses various methods including market, income and cost approaches.  Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique.  These inputs can be readily observable, market-corroborated, or generally unobservable inputs.  The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.  Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy.  The fair value hierarchy ranks the quality and reliability of the information used to determine fair values.  Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1 - Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 - Valuations for assets and liabilities traded in less active dealer or broker markets.  Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

Level 3 - Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

A description of the valuation methodologies used for instruments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.  These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value.

Derivative financial instruments:  Commodity futures and exchange-traded commodity options contracts are reported at fair value utilizing Level 1 inputs.  For these contracts, the Company obtains fair value measurements from an independent pricing service.  The fair value measurements consider observable data that may include dealer quotes and live trading levels from the CBOT and NYMEX markets.  The fair value measurements consider observable data that may include dealer quotes and live trading levels from the over-the-counter markets. 

The following table summarizes the financial liabilities measured at fair value on a recurring basis as of June 30, 2010, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	Total		Level 1		Level 2		Level 3
Liabilities, derivative financial instruments	$	311,640	$	311,640	$	-	$	-

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).  Financial assets and financial liabilities measured at fair value on a nonrecurring basis were not significant at June 30, 2010.

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Lincolnway Energy, LLC

Notes to Unaudited Financial Statements

Note 10. Contingency

In May 2010, a lawsuit was filed against the Company and approximately 20 other ethanol plants by an unrelated party claiming the Company’s operation of the corn oil extraction system is a patent infringement. The plaintiff seeks injunctive relief, an award of damages with interest and any other remedies available under certain patent statutes or otherwise under law.  The Company is currently reviewing the lawsuit with legal counsel.  The Company is unable to determine at this time if the lawsuit will have a material adverse affect on the Company.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Statement on Forward Looking Statements and Industry and Market Data

Various discussions and statements in this Item and other sections of this quarterly report are or contain forward looking statements that express Lincolnway Energy's current beliefs, forecasts, projections and predictions about future events.  All statements other than statements of historical fact are forward looking statements, and include statements with respect to financial results and condition; anticipated trends in business, revenues, net income, net profits or net losses; projections concerning operations, capital needs and cash flow; investment, business, growth, expansion, acquisition and divestiture opportunities and strategies; management's plans or intentions for the future; competitive position or circumstances; and other forecasts, projections and statements of expectation.  Words such as "expects," "anticipates," "estimates," "plans," "may," "will," "contemplates," "forecasts," "future," "strategy," "potential," "predicts," "projects," "prospects," "possible," "continue," "hopes," "intends," "believes," "seeks," "should," "could," "thinks," "objectives" and other similar expressions or variations of those words or those types of words help identify forward looking statements.

Forward looking statements involve and are subject to various material risks, uncertainties and assumptions.  Forward looking statements are necessarily subjective and are made based on numerous and varied estimates, projections, views, beliefs, strategies and assumptions made or existing at the time of such statements and are not guarantees of future results or performance.  Forecasts and projections are also in all events likely to be inaccurate, at least to some degree, and especially over long periods of time, and in particular in a still relatively new and developing industry such as the ethanol industry.  Forecasts and projections are also currently difficult to make with any degree of reliability or certainty given the difficult and uncertain credit, market and other economic circumstances and uncertainties in existence at the time of the preparation of this quarterly report, both generally and with respect to the ethanol industry in particular.  Lincolnway Energy disclaims any obligation to update or revise any forward looking statements based on the occurrence of future events, the receipt of new information, or otherwise.  Lincolnway Energy cannot guarantee Lincolnway Energy's future results, performance or business conditions, and strong or undue reliance must not be placed on any forward looking statements.

Actual future performance, outcomes and results may differ materially from those suggested by or expressed in forward looking statements as a result of numerous and varied factors, risks and uncertainties, some that are known and some that are not, and many of which are beyond the control of Lincolnway Energy and Lincolnway Energy's management.  It is not possible to predict or identify all of those factors, risks and uncertainties, but they include inaccurate assumptions or predictions by management, the accuracy and completeness of the publicly available information upon which part of Lincolnway Energy's business strategy is based and all of the various factors, risks and uncertainties discussed in this Item and elsewhere in this quarterly report and in Item 1A of Lincolnway Energy's Annual Report on Form 10-K for the fiscal year ended September 30, 2009.

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Lincolnway Energy may have obtained industry, market, competitive position and other data used in this quarterly report or Lincolnway Energy's general business plan from Lincolnway Energy's own research or internal surveys, studies conducted by other persons and/or trade or industry associations or general publications and other publicly available information.  Lincolnway Energy attempts to utilize third party sources of information which Lincolnway Energy believes to be materially complete, accurate, balanced and reliable, but there is no assurance of the accuracy, completeness or reliability of any third party information.  For example, a trade or industry association for the ethanol industry may present information in a manner that is more favorable to the ethanol industry than would be presented by an independent source.  Industry publications and surveys and other publicly available information also generally state that they have obtained information from sources believed to be reliable, but do not guarantee the accuracy and completeness of any information.

General Overview

Lincolnway Energy is an Iowa limited liability company that operates a dry mill, coal fired ethanol plant located in Story County, Iowa, near Nevada, Iowa.  Lincolnway Energy has been processing corn into fuel grade ethanol and distillers' grains at the ethanol plant since May 22, 2006.  The first full month of production at full capacity was July of 2006.

The ethanol plant has a nameplate production capacity of 50,000,000 gallons, which, at that capacity, would also generate approximately 136,000 tons of distillers' grains per year.  Lincolnway Energy's revenues are derived primarily from the sale of its ethanol and distillers' grains.

Lincolnway Energy began extracting corn oil from the syrup which is generated in the production of ethanol in April, 2008.  Lincolnway Energy estimates that it will produce approximately 3,000 tons of corn oil per year.  The sale of corn oil is not, however, a material source of revenue for Lincolnway Energy.

Lincolnway Energy's ethanol is marketed by Green Plains Trading Group LLC, and Lincolnway Energy's distillers' grains are marketed by Hawkeye Gold, LLC.  Lincolnway Energy's corn oil is marketed by FEC Solutions, L.L.C.

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Lincolnway Energy has not captured or marketed the carbon dioxide which is produced as part of the ethanol production process.  On April 16, 2010, however, Lincolnway Energy entered into agreements with EPCO Carbon Dioxide Products, Inc. pursuant to which EPCO will construct a plant on Lincolnway Energy's site to collect the carbon dioxide which is produced as part of the ethanol process, convert that raw carbon dioxide into liquid carbon dioxide gas, and market the liquid carbon dioxide.  The EPCO plant became fully operational in August 2010.  Lincolnway Energy does not, however, anticipate that sales of carbon dioxide will be a material source of revenue for Lincolnway Energy.

Lincolnway Energy expects to fund its operations during the next 12 months using cash flow from continuing operations.  Lincolnway Energy also has revolving lines of credit which are available to Lincolnway Energy.

Executive Summary

Highlights for the nine months ended June 30, 2010, are as follows:

· Total revenues increased 6.0% or $4.8 million, compared to the 2009 comparable period.

· Total cost of goods sold decreased 7.6%, or $6.6 million, compared to the 2009 comparable period.

· Interest expense decreased 25.0%, or $.2 million, compared to the 2009 comparable period.

· Net income was $3.7 million, compared to net loss of $7.5 million for the 2009 period.

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Results of Operations

The following table shows the results of operations and the percentages of revenues, cost of goods sold, operating expenses and other items to total revenues in Lincolnway Energy's statement of operations for the three months and nine months ended June 30, 2010 and 2009 ( dollars in thousands):

	Three Months Ended June 30,										Nine Months Ended June 30,
	(Unaudited)										(Unaudited)
Income Statement Data	2010					2009					2010					2009
Revenue	$	25,068		100.0	%	$	23,246		100.0	%	$	85,667		100.0	%	$	80,820		100.0	%
Cost of goods sold		25,630		102.2	%		24,604		105.8	%		79,537		92.8	%		86,112		106.5	%
Gross profit (loss)		(562	)	-2.2	%		(1,358	)	-5.8	%		6,130		7.2	%		(5,292	)	-6.5	%
General and administrative expenses		599		2.4	%		552		2.4	%		1,908		2.2	%		1,777		2.2	%
Operating income (loss)		(1,161	)	-4.6	%		(1,910	)	-8.2	%		4,222		4.9	%		(7,069	)	-8.7	%
Other (expense)		(183	)	-0.7	%		(255	)	-1.0	%		(499	)	-0.6	%		(467	)	-0.6	%
Net income (loss)	$	(1,344	)	-5.4	%	$	(2,165	)	-9.3	%	$	3,723		4.3	%	$	(7,536	)	-9.3	%

The following table shows other key data for the periods presented:

	Three Months Ended June 30,				Nine Months Ended June 30,
	(Unaudited)				(Unaudited)
Operating Data:	2010		2009		2010		2009
Ethanol sold (gallons in thousands)		13,270		11,141		40,508		38,531
Average gross price of ethanol sold (dollars per gallon)	$	1.49	$	1.68	$	1.71	$	1.67
Dry distillers grain sold (tons)		32,456		25,772		93,299		94,177
Average dry distillers grain sales price per ton	$	147.53	$	159.78	$	150.56	$	159.91
Average corn cost per bushel	$	3.43	$	3.79	$	3.55	$	3.85

Results of Operations for the Three Months Ended June 30, 2010 as Compared to the Three Months Ended June 30, 2009

Revenues.  Revenues increased by $1.9 million, or 8.2%, to $25.1 million for the three months ended June 30, 2010 from $23.2 million for the three months ended June 30, 2009.  The increase in revenue was the result of an increase in ethanol and dry distillers grain sold for the three months ended June 30, 2010, compared to the three months ended June 30, 2009.

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Sales from ethanol increased $1.2 million, or 6.5%, to $19.8 million for the three months ended June 30, 2010 from $18.6 million for the three months ended June 30, 2009.  The average price of ethanol sold was $1.49 per gallon for the three months ended June 30, 2010 compared to $1.68 per gallon for the three months ended June 30, 2009.  Sales volume was increased by 19% for the three months ended June 30, 2010 compared to the gallons that were sold for the three months ended June 30, 2009. The increase in ethanol sales for the period over the prior year is due to an extended shutdown that took place in May 2009.

Sales from co-products increased by $.7 million, or 15.2%, to $5.3 million for the three months ended June 30, 2010 from $4.6 million for the three months ended June 30, 2009.  The average price of dried distillers grain sold was $147.53 per ton for the three months ended June 30, 2010, compared to $159.78 for the prior comparable period.  Dried distillers grain sales increased by 6,684 tons, or 25.9%, for the three months ended June 30, 2010 when compared to the three months ended June 30, 2009. Distiller’s grains sales increased for the period over the prior year due to an extended shutdown that took place in May 2009.  For the three months ended June 30, 2010 there were reported sales for excess syrup and corn oil of $.4 million compared to $.3 million for the three months ended June 30, 2009.

Revenues included a combined unrealized and realized loss of $7,417 related to ethanol derivative instruments for the three months ended June 30, 2010 compared to a combined unrealized and realized gain of $0 for the three months ended June 30, 2009. As ethanol prices fluctuate, the value of Lincolnway Energy's ethanol-related derivative instruments are impacted, which effects Lincolnway Energy's financial performance.  Lincolnway Energy expects the volatility in these derivative instruments to continue to have an impact on revenues due to the timing of changes in value of derivative instruments relative to sales.  These instruments are the primary tools of Lincolnway Energy’s risk management program for ethanol revenues.

Cost of goods sold.  Cost of goods sold increased by $1.0 million, or 4.1%, to $25.6 million for the three months ended June 30, 2010 from $24.6 million for the three months ended June 30, 2009.  The increase was due to the increase in ethanol production in the 2010 period compared to the 2009 period.  Cost of goods sold major components are: corn, process chemicals, denaturant, coal, electricity, production labor, repairs and maintenance, freight costs and depreciation.

Corn costs increased by $.4 million, or 2.6%, to $16.0 million for the three months ended June 30, 2010 from $15.6 million for the three months ended June 30, 2009.  Corn costs represented 62.5% of Lincolnway Energy's cost of goods sold for the three months ended June 30, 2010 compared to 64% for the three months ended June 30, 2009.

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The increase in corn costs is primarily driven by increased ethanol production for the current period compared to the prior period.   Lincolnway Energy had a $41,375 marked to market gain during the three months ended June 30, 2010, compared to a $129,737 loss in the same period in 2009.  Since Lincolnway Energy's derivative contracts are marked to market each quarter, the benefits of this risk management tool can cause corn costs to be volatile from quarter to quarter due to the timing of the change in value of the positions relative to the cost and use of the corn commodity being hedged.

Ethanol freight costs decreased $.9 million, to $.7 million for the three months ended June 30, 2010 from $1.6 million for the three months ended June 30, 2009. The decrease is a result of switching to a new ethanol marketer.  The current ethanol marketer prices a majority of the ethanol contracts at an FOB price to Nevada.  The freight is built into the price of ethanol, rather than broken out as a separate cost.  The prior ethanol marketer sold a larger percentage of ethanol on a delivered basis and the freight cost was separate. Denaturant costs (natural gasoline) increased $.2 million to $.4 million for the three months ended June 30, 2010 from $.2 million for the three months ended June 30, 2009.  Denaturant costs have increased significantly from an average cost per gallon of $1.36 for the 2009 period, compared to $1.85 for the 2010 period.

Other income and (expense).  Interest expense decreased $.1 million to $.2 million for the three months ended June 30, 2010 from $.3 million for the three months ended June 30, 2009.  Lincolnway Energy's variable interest rate on its construction and term loan with Co-Bank has decreased to 3.65% as of June 30, 2010 from 3.7% as of June 30, 2009.  Lincolnway Energy has also reduced long term debt by $8.8 million since June 30, 2009.

Results of Operations for the Nine Months Ended June 30, 2010 as Compared to the Nine Months Ended June 30, 2009

Revenues.  Revenues increased by $4.9 million, or 6.1%, to $85.7 million for the nine months ended June 30, 2010 from $80.8 million for the nine months ended June 30, 2009.  The increase in revenue was the result of an increase in ethanol sold and an increase in ethanol selling price for the nine months ended June 30, 2010, compared to the nine months ended June 30, 2009.

Sales from ethanol increased $5.1 million, or 7.9%, to $69.3 million for the nine months ended June 30, 2010 from $64.2 million for the nine months ended June 30, 2009.  The average price of ethanol sold was $1.71 per gallon for the nine months ended June 30, 2010 compared to $1.67 per gallon for the nine months ended June 30, 2009.  There was an 5% increase in ethanol sales volume for the nine months ended June 30, 2010 when compared to the nine months ended June 30, 2009.  The increase in ethanol sales volume for the period over the prior year is due to an extended shutdown that took place in May 2009.

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Sales from co-products decreased by $.9 million, or 5.4%, to $15.7 million for the nine months ended June 30, 2010 from $16.6 million for the nine months ended June 30, 2009.  The average price of dried distillers grain sold was $150.56 per ton for the nine months ended June 30, 2010, compared to $159.91 for the 2009 comparable period. For the nine months ended June 30, 2010 there were reported sales for excess syrup and corn oil of $1.1 million, compared to $.9 million for the nine months ended June 30, 2009.

Revenues included a combined unrealized and realized gain of $593,673, related to ethanol derivative instruments for the nine months ended June 30, 2010, compared to a combined unrealized and realized gain of $10,440 for the nine months ended June 30, 2009.

Cost of goods sold.  Cost of goods sold decreased by $6.6 million, or 7.7%, to $79.5 million for the nine months ended June 30, 2010 from $86.1 million for the nine months ended June 30, 2009.  The decrease was primarily due to lower corn cost and ethanol freight cost in the 2010 period compared to the 2009 period.  Cost of goods sold major components are: corn, process chemicals, denaturant, coal, electricity, production labor, repairs and maintenance, freight costs and depreciation.

Corn costs decreased by $5.0 million, or 8.8% to $51.6 million for the nine months ended June 30, 2010 from $56.6 million for the nine months ended June 30, 2009.  Corn costs represented 65% and 66% of Lincolnway Energy's cost of goods sold for the nine months ended June 30, 2010 and 2009, respectively.

The decrease in corn costs is driven by a decrease in cash corn prices compared to the prior period and also a change in the derivative market for the comparable periods.  The corn costs for the nine months ended June 30, 2010 included a marked to market loss of $22,750 for derivatives relating to future deliveries of corn, compared to a $3.6 million marked to market loss in the same period in 2009.

Ethanol freight costs decreased $3.7 million, to $1.9 million for the nine months ended June 30, 2010 from $5.6 million for the nine months ended June 30, 2009. The decrease is a result of switching to a new ethanol marketer.  The current ethanol marketer prices majority of the ethanol contracts at a FOB price to Nevada.  The freight is built into the price of ethanol, rather than broken out as a separate cost.  The prior ethanol marketer sold a larger percentage of ethanol on a delivered basis and the freight cost was separate. Denaturant costs (natural gasoline) increased $.3 million to 1.3 million for the nine months ended June 30, 2010 from $1.0 million for the nine months ended June 30, 2009.  Denaturant costs have increased significantly from an average cost per gallon of $1.28 for the 2009 period, compared to $1.91 for the 2010 period.

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Other income and (expense).  Interest expense decreased $.2 million to $.6million for the nine months ended June 30, 2010 from $.8 million for the nine months ended June 30, 2009.  Lincolnway Energy's variable interest rate on its construction and term loan with Co-Bank has decreased to 3.65% as of June 30, 2010 from 3.7% as of June 30, 2009.  Lincolnway Energy has also reduced long term debt by $8.8 million since June 30, 2009.  Other income decreased $.2 million for the nine months ended June 30, 2010 compared to the 2009 period due to an increase in income recognized for the Co-Bank patronage distribution from the prior year.

Risks, Trends and Factors that May Affect Future Operating Results

There have been several recent developments in legislation that impacts the ethanol industry.  One such development concerns the federal Renewable Fuels Standard (RFS).  In February 2010, the Environmental Protection Agency (EPA) issued new regulations governing the RFS which has been named RFS2.  The most controversial part of RFS2 is the lifecycle analysis of greenhouse gas emissions.  Specifically, the EPA adopted rules to determine which renewable fuels provided sufficient reductions in greenhouse gases, compared to conventional gasoline, to qualify under the RFS program.  RFS2 establishes a tiered approach, where regular renewable fuels are required to accomplish a 20% greenhouse gas reduction compared to gasoline, advanced biofuels and biomass-based biodiesel must accomplish a 50% reduction in greenhouse gases, and cellulosic biofuels must accomplish a 60% reduction in greenhouse gases.  Any fuels that fail to meet this standard cannot be used by fuel blenders to satisfy their obligations under the RFS program.  The scientific method of calculating these greenhouse gas reductions has been a contentious issue.  Many in the ethanol industry were concerned that corn based ethanol would not meet the 20% greenhouse gas reduction requirement based on certain parts of the environmental impact model that many in the ethanol industry believed was scientifically suspect.  However, RFS2 as adopted by the EPA provides that corn-based ethanol from modern ethanol production processes does meet the definition of a renewable fuel under the RFS program.  Lincolnway Energy’s ethanol plant was grandfathered into the RFS due to the fact that it was constructed prior to the effective date of the lifecycle greenhouse gas requirement and is not required to prove compliance with the lifecycle greenhouse gas reductions.  Further, certain provisions of RFS2 as adopted may disproportionately benefit ethanol produced from sugarcane.  This could make sugarcane based ethanol, which is primarily produced in Brazil, more competitive in the United States ethanol market.  If this were to occur, it could reduce demand for the ethanol that we produce.

In addition to RFS2 which included greenhouse gas reduction requirements, in 2009, California passed a Low Carbon Fuels Standard (LCFS).  The California LCFS requires that renewable fuels used in California must accomplish certain reductions in greenhouse gases which is measured using a lifecycle analysis, similar to RFS2.  Management believes that this lifecycle analysis is based on unsound scientific principles that unfairly disadvantages corn based ethanol.  Management believes that these new regulations will preclude corn based ethanol from being used in California.  California represents a significant ethanol demand market.  If Lincolnway Energy is unable to supply ethanol to California, it could significantly reduce demand for the ethanol Lincolnway Energy produces.  Several lawsuits have been filed challenging the California LCFS. The California LCFS goes into effect January 1, 2011.

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Ethanol production in the United States is benefited by various tax incentives.  The most significant of these tax incentives is the federal Volumetric Ethanol Excise Tax Credit (VEETC).  VEETC provides a volumetric ethanol excise tax credit of 4.5 cents per gallon of ethanol blended with gasoline at a rate of 10%.  VEETC is scheduled to expire on December 31, 2010.  If this tax credit is not renewed, it likely would have a negative impact on the price of ethanol and demand for ethanol in the marketplace and may harm our financial condition.

Supply of corn for the 2010-2011 growing season is sufficient but tightening a bit.  The USDA’s most recent projections suggest overall US corn production to be 13.245 billion bushels with overall usage at 13.360 billion bushels.  Ethanol accounts for 4.7 billion bushels of that total.  Excess stocks or carryover of corn on September 30, 2011 is projected to be at 1.373 billion bushels.  For comparison, excess corn stocks at the end of the 2009/2010 (current) season are estimated to be at 1.454 billion bushels. 

Supplies and production capacities of ethanol remain heavy relative to current demand limitations.  Installed ethanol production capacity by the end of 2010 is forecast to be at 14.5 billion gallons per year.  Most recent 4-week ethanol production rates are at 12.6 billion gallons per year.  Most recent 4-week average demand for ethanol is at 12.5 billion gallons per year. The industry remains oversupplied from an actual production standpoint, as well as a production capacity standpoint.  1.5-2.0 billion per gallons of production is currently idled or expected to be shut down by the end of the year.  This current situation is also causing an increase in ethanol stocks.  Ethanol stocks have grown approximately 210 million gallons in the nine months ending June 30, 2010, to an estimated current stocks estimate of 810 million gallons.

All the above changes in governmental policy and supply and demand factors are an ongoing risk factor for the ethanol industry and for Lincolnway Energy.

Liquidity and Capital Resources

The following table summarizes Lincolnway Energy's sources and uses of cash and cash equivalents from Lincolnway Energy's unaudited statement of cash flows for the periods presented (in thousands):

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	Nine Months Ended June 30,
	(Unaudited)
Cash Flow Data:	2010			2009
Net cash provided by (used in) operating activities	$	8,146		$	(3,851	)
Net cash used in investing activities		(346	)		(602	)
Net cash used in financing activities		(8,423	)		(1,319	)
Net decrease in cash and cash equivalents		(623	)		(5,772	)

For the nine months ended June 30, 2010, net cash provided by operating activities increased by $12.0 million, when compared to cash provided by operating activities for the nine months ended June 30, 2009. The increase in cash provided by operating activities is primarily due to an increase in net income for the nine months ended June 30, 2010 of $11.3 million, due to the improved market conditions the ethanol industry experienced in the nine months ended June 30, 2010 compared to 2009 period. Lincolnway Energy had a $1.2 million decrease in accounts receivable on June 30, 2010 compared to the prior year. This was the result of earlier receipt of customer payments in the 2010 period compared to 2009. Lincolnway Energy also had a $1.3 million increase in accounts payable from the prior year that increased the cash balance.   These cash increases were offset by a $1.7 million increase in inventory for the nine months ended June 30, 2010 compared to the prior period.  This is due to carrying over finished goods inventory to future months to obtain a higher ethanol selling price.

Cash flows used in investing activities reflect the impact of property and equipment acquired for the ethanol plant and proceeds from investments. Net cash used in investing activities decreased by $.3 million for the nine months ended June 30, 2010 when compared to cash used in investing activities for the nine months ended June 30, 2009.  This decrease is a result of less money spent on capital purchases for fiscal period 2010.

Cash flows from financing activities include transactions and events whereby cash is obtained from, or paid to, depositors, creditors or investors.  Net cash used in financing activities increased by $7.1 million for the nine months ended June 30, 2010 when compared to net cash used in investing activities for the nine months ended June 30, 2009.  The increase is due to an increase in member distribution payments of $2.1 million and an increase in payments on long-term borrowings of $6.3 million for the nine months ended June 30, 2010.

If market conditions continue to decline in the future quarter, Lincolnway Energy could expect to see net losses for the fourth quarter of fiscal year 2010 and possibly future quarters.  Lincolnway Energy still has significant depreciation and amortization expense; approximately $8.3 million budgeted for fiscal year 2010, which does not require cash expenditures.  Lincolnway Energy anticipates keeping cash balances at a low but acceptable level that will meet bank covenants.  Lincolnway Energy’s next term loan payment is due June 2011.  If Lincolnway Energy does get in a negative cash position, Lincolnway Energy has access to its $10.0 million line of credit.  As of August 2010, Lincolnway Energy is in compliance with all bank covenants related to bank financing.

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Lincolnway Energy's financial position and liquidity are, and will be, influenced by a variety of factors, including:

· ability to generate positive cash flows from operations;

· the level of outstanding indebtedness and the interest we are obligated to pay; and

· capital expenditure requirements, which consists primarily of plant improvements to improve efficiencies and rail expansion.

Lincolnway Energy expects to have available cash to meet its anticipated liquidity needs.

Critical Accounting Estimates and Accounting Policies

Lincolnway Energy's financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and follow general practices within the industries in which Lincolnway Energy operates.  Preparation of financial statements requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes.  These estimates, assumptions and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, actual results could differ from the estimates, assumptions, and judgments reflected in the financial statements.  Certain policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported.  Management believes the following policies are both important to the portrayal of Lincolnway Energy's financial condition and results of operations and require subjective or complex judgments; therefore, management considers the following to be critical accounting policies.

Off-Balance Sheet Arrangements

Lincolnway Energy currently does not have any off-balance sheet arrangements.

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Revenue Recognition

This generally occurs upon the loading of the product.  For ethanol, title passes from Lincolnway Energy at the time the product crosses the loading flange into either a railcar or truck. For distiller’s grains, title passes upon the loading of distiller's grains into trucks.  For railcar shipments, title passes when the railcar is filled and the marketer receives written notice that the railcars have been loaded and is available for billing.  Shipping and handling costs incurred by Lincolnway Energy for the sale of ethanol and distiller’s grain are included in costs of goods sold.

Lincolnway Energy’s ethanol is sold to Green Plains Trading Group (GPTG).  The purchase price payable to Lincolnway Energy is GPTG's contract selling price for the ethanol in question, less various costs and a fee to GPTG.  The ethanol marketing agreement includes a minimum purchase price.  Title and all risk of loss and damage to all ethanol commences at the time the ethanol passes across the inlet flange into rail cars or tank cars of the GPTG carrier at the Lincolnway Energy plant.

Lincolnway Energy’s distiller’s grain production is sold to Hawkeye Gold, LLC.  Lincolnway Energy pays Hawkeye Gold, LLC a marketing fee for dried distiller’s grains equal to the greater of 2% of the FOB plant price for the dried distiller’s grain or a per-ton fee of $1.30 for the dried distiller’s grain.  The marketing fee for wet distiller’s grains is the greater of 3% of the FOB plant price for the wet distiller’s grains or a per-ton fee of $1.00 for the wet distiller’s grains.

Lincolnway Energy’s corn oil production is sold to FEC Solutions, LLC (FECS). For corn oil, title passes upon the loading of the corn oil into trucks.  The purchase price payable by FECS for each shipment of corn oil is the FOB sales price less a marketing and technical assistance fee in an amount equal to 5% of the FOB sales price.

Derivative Instruments

Lincolnway Energy enters into derivative contracts to hedge its exposure to price risk related to forecasted corn needs and forward corn purchase contracts.  Lincolnway Energy does not typically enter into derivative instruments other than for hedging purposes.  All derivative contracts are recognized on the June 30, 2010 balance sheet at fair market value.  Although Lincolnway Energy believes its derivative positions are economic hedges, none has been designated as a hedge for accounting purposes.  Accordingly, any realized or unrealized gain or loss related to these derivative instruments is recorded in the statement of operations as a component of cost of goods sold for corn derivatives and through revenue for ethanol derivatives.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

In addition to the various risks inherent in Lincolnway Energy's operations, Lincolnway Energy is exposed to various market risks.  The primary market risks arise as a result of possible changes in certain commodity prices and changes in interest rates.

Commodity Price Risk

Lincolnway Energy is exposed to market risk with respect to the price of ethanol, which is Lincolnway Energy's principal product, and the price and availability of corn and coal, which are the principal commodities used by Lincolnway Energy to produce ethanol.  The other primary product of Lincolnway Energy is distiller's grains, and Lincolnway Energy is also subject to market risk with respect to the price for distiller's grains.  The prices for ethanol, distiller's grains, corn and coal are volatile, and Lincolnway Energy will experience market conditions where the prices Lincolnway Energy receives for its ethanol and distiller's grains are declining, but the price Lincolnway Energy pays for its corn, coal and other inputs is increasing.  Lincolnway Energy's results will therefore vary substantially over time, and include the possibility of losses, which could be substantial.

In general, rising ethanol and distiller's grains prices result in higher profit margins, and therefore represent favorable market conditions.  Lincolnway Energy is, however, subject to various material risks related to its production of ethanol and distiller's grains and the price for ethanol and distiller's grains.  For example, ethanol and distiller's grains prices are influenced by various factors beyond the control of Lincolnway Energy's management, including the supply and demand for gasoline, the availability of substitutes and the effects of laws and regulations.

In general, rising corn prices result in lower profit margins and, accordingly, represent unfavorable market conditions.  Lincolnway Energy will generally not be able to pass along increased corn costs to its ethanol customers.  Lincolnway Energy is subject to various material risks related to the availability and price of corn, many of which are beyond the control of Lincolnway Energy.  For example, the availability and price of corn is subject to wide fluctuations due to various unpredictable factors, including weather conditions, crop yields, farmer planting decisions, governmental policies with respect to agriculture, and local, regional, national and international trade, demand and supply.  If Lincolnway Energy's corn costs were to increase $.10 per bushel from one year to the next, the impact on cost of goods sold would be approximately $1.95 million for the year, assuming corn use of 19.5 million bushels during the year.  Lincolnway Energy used 18.8 million bushels of corn during the fiscal year ended September 30, 2009.

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Lincolnway Energy's average gross corn cost during the three and nine months ended June 30, 2010 was, respectively, approximately $3.43 and $3.55 per bushel, compared to $3.79 and $3.85 per bushel, respectively, for the three and nine months ended June 30, 2009.

During the quarter ended June 30, 2010, corn prices based on the Chicago Mercantile Exchange daily futures data ranged from a low of $3.24 per bushel for July 2010 delivery to a high of $3.85 per bushel for July 2010 delivery.  The corn prices based on the Chicago Mercantile Exchange daily futures data during the quarter ended June 30, 2009 ranged from a low of $3.40 per bushel for July 2009 delivery to a high of $4.50 per bushel for July 2009 delivery.

The average price Lincolnway Energy received for its ethanol during the three and nine months ended June 30, 2010 was, respectively, $1.49 and $1.71 per gallon, as compared to $1.68 and $1.67 per gallon, respectively, during the three and nine months ended June 30, 2009.

During the quarter ended June 30, 2010, ethanol prices based on the Chicago Mercantile Exchange daily futures data ranged from a low of $1.47 per gallon for July 2010 delivery to a high of $1.66 per gallon for July 2010 delivery.  The ethanol prices based on the Chicago Mercantile Exchange daily futures data during the quarter ended June 30, 2009 ranged from a low of $1.54 per gallon for July 2009 delivery to a high of $1.791 for July 2009 delivery.

Lincolnway Energy may from time to time take various cash, futures, options or other positions with respect to its corn needs in an attempt to minimize or reduce Lincolnway Energy's price risks related to corn.  Those activities are, however, also subject to various material risks, including that price movements in the cash and futures corn markets are highly volatile and are influenced by many factors and occurrences which are beyond the control of Lincolnway Energy.

Although Lincolnway Energy intends its futures and option positions to accomplish an economic hedge against Lincolnway Energy's future purchases of corn or futures sales of ethanol, Lincolnway Energy has chosen not to use hedge accounting for those positions, which would match the gain or loss on the positions to the specific commodity purchase being hedged.  Lincolnway Energy is instead using fair value accounting for the positions, which generally means that as the current market price of the positions changes, the realized or unrealized gains and losses are immediately recognized in Lincolnway Energy's costs of goods sold in the statement of operations for corn positions or as a component of revenue in the statement of operations for ethanol positions.  The immediate recognition of gains and losses on those positions can cause net income to be volatile from quarter to quarter due to the timing of the change in value of the positions relative to the cost and use of the commodity being hedged.  For example, Lincolnway Energy's net loss on corn derivative financial instruments that was included in its cost of goods sold for the nine months ended June 30, 2010 was $22,750, as opposed to the net loss of $3,553,913 for the nine months ended June 30, 2009.

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The extent to which Lincolnway Energy may enter into arrangements with respect to its ethanol or corn during the year may vary substantially from time to time based on a number of factors, including supply and demand factors affecting the needs of customers to purchase ethanol or suppliers to sell Lincolnway Energy raw materials on a fixed basis, Lincolnway Energy's views as to future market trends, seasonable factors and the cost of future contracts.

Lincolnway Energy's cost per ton for coal under its current coal supply agreement is subject to various fixed and periodic adjustments based on factors which are outside of the control of Lincolnway Energy's management. The factors include changes in certain inflation type indices, increases in transportation costs and the quality of coal.  Lincolnway Energy's coal costs will therefore vary, and the variations could be material.  Lincolnway Energy's coal costs for the nine months ended June 30, 2010 and 2009 represented approximately 6% of Lincolnway Energy's total cost of goods sold for that period.  

Interest Rate Risk

Lincolnway Energy has various loan agreements and promissory notes which expose Lincolnway Energy to market risk related to changes in the interest rate imposed under those loan agreements and promissory notes.

The interest rate under all of the loan agreements and promissory notes, other than with respect to $1,250,000 of the loan with Co-Bank, are, however, fixed at rates ranging from 0% to 6.62% per annum.  The variable interest rate for $1,250,000 of the Co-Bank loan is based on the one month LIBOR index rate plus 3.3%, and was at 3.65% per annum as of June 30, 2010.  Lincolnway Energy's outstanding loan amount with Co-Bank as of June 30, 2010 was $9,000,000.   As noted, $1,250,000 of that amount accrues interest at the variable interest rate described above.  The remaining balance of the loan is fixed at 6.62% per annum until July, 2011.

Lincolnway Energy does not anticipate any material increase in interest rates during the remainder of 2010.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Lincolnway Energy's  management,  under the supervision and with  the  participation  of  Lincolnway Energy's president and chief executive officer and Lincolnway Energy's chief financial  officer,  have evaluated the  effectiveness of Lincolnway Energy's disclosure  controls  and  procedures  (as defined in Rule  13a-15(e) under the Securities  Exchange  Act of 1934) as of the end of the  period covered by this quarterly report.  Based on that evaluation,  Lincolnway Energy's president and chief executive officer and Lincolnway Energy's chief financial  officer have  concluded  that, as of the end of the period covered by this quarterly report, Lincolnway Energy's disclosure controls and procedures have been effective to provide  reasonable  assurance that the information required to be disclosed in the reports Lincolnway Energy  files or submits  under the Securities Exchange  Act of 1934 is (i)  recorded,  processed, summarized and reported within the time  periods  specified  in the  Securities  and  Exchange Commission's   rules  and  forms,  and  (ii)  accumulated  and  communicated  to management,  including Lincolnway Energy's  principal executive and principal financial officers or persons performing such functions,  as appropriate,  to allow timely decisions regarding  disclosure.  Lincolnway Energy believes, however, that a control system, no matter how well designed and operated, cannot provide absolute  assurance that the  objectives of the control system are met, and no evaluation of controls can provide  absolute  assurance that all control issues and instances of fraud,  if any, within a company have been detected.

No Changes in Internal Control Over Financial Reporting

No change in Lincolnway Energy's internal control over financial reporting occurred during the quarter covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, Lincolnway Energy's internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

Except as noted in the following paragraph, as of the date of this quarterly report, Lincolnway Energy was not aware of any material pending legal proceeding to which Lincolnway Energy was a party or of which any of Lincolnway Energy's property was the subject, other than ordinary routine litigation, if any, that was incidental to Lincolnway Energy's business.  As of the date of this quarterly report, Lincolnway Energy was not aware that any governmental authority was contemplating any material proceeding against Lincolnway Energy or any of Lincolnway Energy's property.

A Complaint for Patent Infringement was filed against Lincolnway Energy and certain other parties on May 3, 2010 by GS CleanTech Corporation.  The Complaint was filed in the United States District Court for the Northern District of Iowa, Western Division.  The Complaint alleges, in general, that the corn oil extraction equipment and related processes used by Lincolnway Energy and the other parties infringes upon one or more of the claims under certain patents held by GS CleanTech Corporation.  The Complaint seeks injunctive relief, an award of damages with interest, and any other remedies available under certain patent statutes or otherwise under law.  Lincolnway Energy is reviewing the Complaint and considering its response.  Lincolnway Energy is unable to determine at this time if the Complaint will have a material adverse effect on Lincolnway Energy.

Item 1A. Risk Factors.

There have been no material changes from the risk factors as previously disclosed in Lincolnway Energy's Form 10-K for the fiscal year ended September 30, 2009 and filed with the Securities and Exchange Commission on December 22, 2009.  There have been, however, some additional legislative risks that are discussed below.

A legislative risk to the ethanol industry is that unless Congress timely acts, various ethanol tax incentives will expire on December 31, 2010, including the $0.45 per gallon blenders credit for ethanol use and the $0.54 secondary tariff on imported ethanol.  Bills have been proposed to extend those tax incentives through the year 2015, but there is no assurance that those bills will be timely passed or passed at all.  The loss of those tax incentives would have material adverse effects on the ethanol industry.  The effects could be similar to those caused in the biodiesel industry by the failure to extend the biodiesel tax incentives, which expired at the end of 2009 and have still not been reinstated.

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California passed a Low Carbon Fuels Standard (LCFS).  The California LCFS requires that renewable fuels used in California must accomplish certain reductions in greenhouse gases which is measured using a lifecycle analysis, similar to RFS2.  Management believes that this lifecycle analysis is based on unsound scientific principles that unfairly disadvantages corn based ethanol.  Management believes that these new regulations will preclude corn based ethanol from being used in California.  California represents a significant ethanol demand market.  If Lincolnway Energy is unable to supply ethanol to California, it could significantly reduce demand for the ethanol Lincolnway Energy produces.  Several lawsuits have been filed challenging the California LCFS. The California LCFS goes into effect January 1, 2011.

Another continuing issue for the ethanol industry is the fact that current law and infrastructure effectively preclude the use of greater than 10% ethanol blends in conventional automobiles, sometimes referred to as the "blend wall".  Advocates have been lobbying the EPA and Congress to increase the permitted percentage for all vehicles from anywhere from 12% to 20%.  Without an increase in the permitted blend percentage, it will be difficult for there to be significant growth in the ethanol industry.

Some other key areas of legislative interest to the ethanol industry are increasing the required use of flexible fuel vehicles (E85 vehicles) and blender pumps.

An investment in any membership units of Lincolnway Energy involves a high degree of risk and is a speculative and volatile investment.  An investor could lose all or part of his or her investment in any membership units.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Lincolnway Energy did not sell any membership units during the period of April 1, 2010 through June 30, 2010.

None of Lincolnway Energy's membership units were purchased by or on behalf of Lincolnway Energy or any affiliated purchaser (as defined in Rule 10b-18(a)(3) of the Exchange Act) of Lincolnway Energy during the period of April 1, 2010 through June 30, 2010.

Item 3. Defaults Upon Senior Securities.

There has been no material default in the payment of principal, interest, a sinking or purchase fund installment, or any other material default not cured within thirty days, with respect to any indebtedness of Lincolnway Energy exceeding 5% of the total assets of Lincolnway Energy.

No material arrearage in the payment of dividends or any other material delinquency has occurred with respect to any class of preferred membership units of Lincolnway Energy which is registered or which ranks prior to any class of registered membership units of Lincolnway Energy.

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Item 5. Other Information.

There was no information required to be disclosed in a report on Form 8-K during the period of April 1, 2010 through June 30, 2010 which was not reported on a Form 8-K.

There were no material changes during the period of April 1, 2010 through June 30, 2010 to the procedures by which the members of Lincolnway Energy may recommend nominees to Lincolnway Energy's board.

Item 6. Exhibits.

The following exhibits are filed as part of this quarterly report.  Exhibits previously filed are incorporated by reference, as noted.

			Incorporated by Reference
Exhibit		Filed Herewith;		Period		Filing
Number	Exhibit Description	Page Number	Form	Ending	Exhibit	Date
3.1	Articles of Restatement		10-Q	6/30/07	3.1	8/13/07
3.2	Amended and Restated Operating Agreement and Unit Assignment Policy		10-Q	6/30/07	3.2	8/13/07
10.2	Master Loan Agreement Between Lincolnway Energy, LLC and Farm Credit Services of America		10		10.2	1/27/06
10.3	Construction and Term Loan Supplement Between Lincolnway Energy, LLC and FarmCredit Services of America		10		10.3	1/27/06
10.4	Construction and Revolving Term Loan Supplement Between Lincolnway Energy, LLC and Farm Credit Services of America		10		10.4	1/27/06
10.5	Loan Agreement Between Lincolnway Energy,  LLC and Iowa Department of Transportation		10		10.5	1/27/06
10.7	Distiller's Grain Marketing Agreement Between Lincolnway Energy, LLC and Hawkeye Gold, LLC		10-K	9/30/07	10.7	12/21/07

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*10.9	Coal Supply Agreement Between Lincolnway Energy, LLC and Williams Bulk Transfer, Inc.  See Exhibit 10.9.1 for an amendment to this agreement.		10		10.9	1/27/06
*10.9.1	Amendment Number Oneto Coal Supply Agreement Between Lincolnway Energy, LLC and Williams Bulk Transfer, Inc.		10-K	9/30/07	10.9.1	12/21/07
10.10	Loan Agreement Between Lincolnway Energy, LLC and Iowa Department ofEconomic Development		10		10.10	1/27/06
10.11	Amended and Restated Grain Handling Agreement Between Lincolnway Energy, LLC and Heart of Iowa Cooperative		10		10.11	1/27/06
10.13	Industry Track Contract Between Lincolnway Energy, LLC and Union Pacific Railroad		10-Q	6/30/06	10.13	8/14/06
*10.15	Ethanol Marketing Agreement Between Lincolnway Energy, LLC and Green Plains Trade Group LLC		10-K	9/30/09	10.15	12/22/09
31.1	Rule 13a-14(a) Certification of President and Chief Executive Officer	E-1
31.2	Rule 13a-14(a) Certification of Chief Financial Officer	E-3
32.1	Section 1350 Certification of President and Chief Executive Officer	E-5
32.2	Section 1350 Certification of Chief Financial Officer	E-6

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* Material has been omitted pursuant to a request for confidential treatment and such material has been filed separately with the Securities and Exchange Commission.

[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LINCOLNWAY ENERGY, LLC
August 13, 2010	By:	/s/   Richard Brehm
	Name:    Richard Brehm
	Title:      President and Chief
	Executive Officer
August 13, 2010	By:	/s/   Kim Supercynski
	Name:    Kim Supercynski
	Title:      Chief Financial Officer

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EXHIBIT INDEX

Exhibits Filed With Form 10-Q

of Lincolnway Energy, LLC

For the Quarter Ended June 30, 2010

Description of Exhibit.			Page
31.	Rule 13a-14(a)/15d-14(a) Certifications
	31.1	Rule 13a-14(a) Certification of President and Chief Executive Officer	E-1
	31.2	Rule 13a-14(a) Certification of Chief Financial Officer	E-3
32.	Section 1350 Certifications
	32.1	Section 1350 Certification of President and Chief Executive Officer	E-5
	32.2	Section 1350 Certification of Chief Financial Officer	E-6

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